Research on accounting for impairment of assets for fixed assets according to international accounting standards and how some countries apply ias 36, some proposes for vietnam to integrate international economy and create favorable condition for fdi enter

Nội dung text: Research on accounting for impairment of assets for fixed assets according to international accounting standards and how some countries apply ias 36, some proposes for vietnam to integrate international economy and create favorable condition for fdi enter

1. RESEARCH ON ACCOUNTING FOR IMPAIRMENT OF ASSETS FOR FIXED ASSETS ACCORDING TO INTERNATIONAL ACCOUNTING STANDARDS AND HOW SOME COUNTRIES APPLY IAS 36, SOME PROPOSES FOR VIETNAM TO INTEGRATE INTERNATIONAL ECONOMY AND CREATE FAVORABLE CONDITION FOR FDI ENTERPRISES Pham Anh Tuan1 Abstract: Accounting for impairment of assets for fixed assets has not been developed and applied in Vietnamese accounting. This is one of the accounting contents that play an important role in ensuring the accuracy and reliability of published information about fixed assets in the financial statements. This indirectly affects the process of international accounting convergence and international economic integration. Even the lack of accounting for impairment of assets for fixed assets can affect the investment decision-making process of FDI enterprises with foreign capital. Therefore, I want through this article to generalize the accounting work of impairment of assets for fixed assets according to international accounting standards and in countries with developed accounting science such as France and America. From there, i also compare them with accounting for impairment of assets in Vietnam. I also outline the problems that current businesses in general and FDI enterprises in particular will face when Vietnamese accountants do not have regulations on accounting for fixed impairment of assets. At the same time, I will point out the remaining difficulties that may hinder the process of developing and applying accounting for impairment of assets in Vietnamese accounting. From there, I will draw lessons from experience and make policy recommendations to improve Vietnam’s regulations, in order to approach international practices and create favorable conditions for FDI enterprises. Keywords: Impairment of assets, American accounting, International economic integration, French accounting, Fixed assets, FDI enterprises. INTRODUCTION Globalization trends and international economic integration are increasingly concerned and placed at the forefront in the socio-economic development of each country. Now, investment activities and economic competition no longer just stop at the scale of enterprises in the same country, but it happens on a global perspective. In Vietnam, international economic integration is increasingly becoming an urgent requirement in the development of the home country. In recent years, Vietnam is becoming a destination for economic investment activities because of the stability of the socio-economy and open economic policies; the most obvious manifestation is that FDI enterprises (Foreign Direct Investment) are increasing both in quantity and quality. However, from the investors’ perspective, Vietnam still has some differences in socio-economic factors; these are barriers to investment activities, globalization trends and international economic integration. One of the factors that must take into account 1 Haiphong University; Email: tuanpa@dhhp.edu.vn 982
2. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 983 the difference in the accounting system. The Vietnamese Accounting Standards System (VAS) is built by the Ministry of Finance on the basis of the International Accounting Standards System (IAS) in a suitable orientation to our country’s socio-economy. However, VAS still has many differences compared to IAS, many accounting standards and accounting issues have not been formulated and applied. Specifically, the international accounting standard IAS 36: Impairment of Assets has not been developed yet and has been studied for application in Vietnamese accounting. Meanwhile, IAS 36 is one of the standards playing an important role in ensuring the accuracy and true reflection of the actual value of assets in general, fixed assets in particular in enterprises. This is a problem that businesses in general and FDI enterprises in particular are very interested in. Because FDI enterprises are foreign-invested enterprises, the accuracy of asset and capital information for these enterprises should be of top priority. Therefore, the development and application of IAS 36 is an urgent issue for State managers and standards-drafting and drafting agencies. However, building and applying IAS 36 to the economy of each country is not a simple matter and there are many ways to build and apply this standard in countries around the world. In some countries such as France and the US, accounting standard IAS 36 has been developed and applied relatively scientifically, suitable to the socio-economic characteristics of each country. This helps to increase the accuracy in reflecting and presenting accounting information, especially information about fixed assets in the economy. This also helps to reduce risks in the process of using information, in the operation of businesses. At the same time, this also helps to shorten the gap with international accounting and promote the process of international economic integration. For these reasons, researching on accounting for impairment of assets for fixed assets in accordance with international accounting standards and in American accounting and French accounting to draw lessons from experience in order to set up and apply to Vietnamese accounting in light of the urgent needs of international economic integration and the development of FDI enterprises is essential for Vietnamese accountants today. Literature review. Currently, accounting for impairment of assets has not been built up and applied in Vietnamese accounting. Meanwhile, this accounting standard has been issued in the system of international accounting standards and is absorbed, built and applied by many countries. This indirectly becomes a barrier to the investment attraction process, affecting the development of enterprises in general and FDI enterprises in particular. In addition, this also impedes the process of international accounting convergence and international economic integration of our country. Therefore, this issue has been interested in research by many authors. Previous studies on accounting for impairment of assets according to my knowledge must include: The article “Decreasing the value of assets and the illusion of real value of assets in enterprises in Vietnam” by Tran Manh Dung was published in the Journal of “Auditing Scientific Research”. Accounting Master’s thesis: “IAS 36 standards and conditions for applying IAS 36 in Vietnam” by Chu Thuy Anh in 2013.
3. 984 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI Economic doctoral thesis: “Research on accounting application to decrease tangible fixed assets in Vietnam” by Pham Thi Minh Hong in 2016. Economic doctoral thesis: “Improving accounting of provisions and impairment of assets in construction enterprises in Vietnam” by Dang Thi Hong Ha in 2017. The aforementioned research works have solved certain issues when researching “impairment of assets” accounting in Vietnam. As follows: For the article “Decreasing the value of assets and the illusion of real value of assets in enterprises in Vietnam” by Tran Manh Dung, published in the Journal of “Auditing Scientific Research “. This article has briefly systematized the content of international accounting standards IAS 36. Besides, the article also mentions how to view and evaluate asset value in enterprises in Vietnam. There are still shortcomings in the process of determining and assessing the value of the enterprise’s assets when there is no impairment of assets standard. However, the article still has many unmentioned contents and needs to be further researched. Specifically, the article has not considered the development and application of IAS 36 in countries around the world; the article also has not pointed out the reasons that hinder the development and application of IAS 36 in Vietnam. The article has not considered the difficulties that enterprises in general and FDI enterprises in particular will face when there are no regulations on accounting for impairment of assets. The article has not proposed orientations on the development and application of this standard in Vietnam in many ways that other countries in the world have applied. For master’s thesis: “IAS 36 standards and conditions for applying IAS 36 in Vietnam” by Chu Thuy Anh in 2013. This work has shown the history of international accounting standards IAS 36 and the detailed content of this standard. This work has evaluated the difficulties and advantages in the application of IAS 36. Since then, this work has proposed the application conditions and solutions to apply this standard in Vietnam in many aspects. such as: building and completing a system of Vietnamese accounting standards consistent with the world, building measures and roadmaps to apply, promote human resources and infrastructure development etc. However, this study still has many scientific gaps that need to be further researched and clarified such as: the work only mentions the difficulties in building IAS 36 in Vietnam in terms of aspects: human resources, language barriers, the development of national accounting but not to mention difficulties such as: differences in accounting principles, or asset valuation The accuracy of the information and the increase in the uniformity in the accounting system create a premise for building impairment of assetsstandards. At the same time, this work has not considered the ways of applying IAS 36 standards in previous countries, and has not analyzed the difference of application methods to find solutions to develop and apply IAS 36 most suitable for Vietnamese accountants. The work has not considered the difficulties that enterprises in general and FDI enterprises in particular will face when there are no regulations on accounting for impairment of assets.
4. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 985 For the economic doctoral thesis: “Research on accounting application to decrease tangible fixed assets in Vietnam” by Pham Thi Minh Hong in 2016. For this scientific work, the author has systematized the theory of impairment of asset value accounting. The author has also synthesized the opinions of subjects in the economy on the accounting problem of decline in tangible fixed assets value. This will serve as the basis for proposing ways to build up the value of tangible fixed assets in Vietnam. However, this work still has some contents that have not been mentioned in detail, namely: The author points to the theoretical system of asset value impairment according to international accounting practices without considering to accounting methods in other countries such as France, USA ; The author has not considered the differences and factors that may be barriers to the process of building and applying accounting for impairment of assets for fixed assets in Vietnam. The work has not considered the difficulties that enterprises in general and FDI enterprises in particular will face when there are no regulations on accounting for impairment of assets of fixed assets. With this work, the author has proposed proposes a direction to develop accounting for the decline in asset value, but the author has not considered other applicability when it is not possible to develop or apply the full text of IAS 36 in Vietnam. Economic doctoral thesis: “Improving accounting of provisions and impairment of assets in construction enterprises in Vietnam” by Dang Thi Hong Ha in 2017. For this scientific work, the author has systematized the theory of impairment of asset value accounting; the author has introduced accounting methods for impairment of assets for the America and some countries. The author has also researched and proposed solutions to improve the accounting status of provisions and impairment of assets in construction enterprises in Vietnam to improve the quality of information presented in the financial statements to meet the management and use of information requirements. The research work still has some contents that need to be further researched and clarified. Specifically as follows: The author only focuses on the theoretical system of accounting for impairment of assets in the US, but in other countries only briefly summarizes it; At the same time, the author has not considered the differences and factors that may be barriers to the process of developing and applying accounting for impairment of assets for fixed assets in Vietnam. The author has not considered the difficulties that enterprises in general and FDI enterprises in particular will face when there are no regulations on accounting for impairment of fixed assets. The author has proposed directions to develop and apply accounting for impairment of assets at construction companies in Vietnam, but the author has not considered other applicability when it is not possible to develop or apply all IAS 36 in Vietnam. On the basis of the results of the above studies, through this article, I will continue to conduct additional research and clarify the following contents: Overview of the accounting method of impairment of assets for fixed assets according to International Accounting Standard IAS 36: Impairment of Assets and in some countries with developed accounting science developed as French accounting, American accounting.
5. 986 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI An overview of the current accounting status of impairment of assets for fixed assets in Vietnamese accounting and comparison with international accounting practices and countries with developed accounting science such as France and the United States. Analyze the remaining difficulties of enterprises in general and FDI enterprises in particular in Vietnam when there are no regulations on accounting for impairment of assetsfor fixed assets. Analyze the causes leading to the difference in construction and application of accounting standards for impairment of assets for fixed assets for Vietnamese accountants. Propose policy recommendations to improve Vietnam’s accounting for impairment of assets regulations, in order to approach international practices and create favorable conditions for FDI enterprises. Theoretical basis. The theoretical basis that I will use in the article is: - International Accounting Standards System (IAS). - Vietnam Accounting Standards System (VAS). - Guide to corporate accounting regime. - Circular 200/2014 / TT-BTC issued by the Ministry of Finance on December 22, 2014. - Guidance on accounting regime for small and medium enterprises - Circular 133/2016 / TT-BTC issued by the Ministry of Finance on August 26, 2016. - Guidance on the regime of management, use and depreciation of fixed assets - Circular 45/2013 / TT-BTC issued by the Ministry of Finance on April 25, 2013. - The previous studies related to property loss. Include: + Chu Thuy Anh (2013), IAS 36 standards and conditions for applying IAS 36 in Vietnam, Master’s thesis in accounting, Ho Chi Minh City University of Technology. + Tran Manh Dung, scientific article: “Decreasing the value of assets and the illusion of real value of assets in enterprises in Vietnam”, Journal of Scientific Research, audited. + Pham Thi Minh Hong (2016), “Research on accounting application to decrease tangible fixed assets value in Vietnam”, Doctoral thesis in economics, National Economics University. + Dang Thi Hong Ha (2017), “Improving accounting of provisions and impairment of assets in construction enterprises in Vietnam”, Economic doctoral thesis, Academy of Finance. Data and research methods. The main research methods that I used in this article include: Methods of document analysis. Applying matching standards: I reviews and compares the accounting activities of impairment of assets for fixed assets in Vietnam with international accounting standards and some countries in the world such as: : France, America. Besides, I also used a number of research methods such as: theoretical research, problem analysis and synthesis etc.
6. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 987 With this article, I will conduct research and clarify the following contents: Overview of the accounting method of impairment of assets for fixed assets according to International Accounting Standard IAS 36: Impairment of Assets and in some countries with developed accounting science developed as French accounting, American accounting. An overview of the current accounting status of impairment of assets for fixed assets in Vietnamese accounting and comparison with international accounting practices and countries with developed accounting science such as France and the United States. Analyze the remaining difficulties of enterprises in general and FDI enterprises in particular in Vietnam when there are no regulations on accounting for impairment of assetsfor fixed assets. Analyze the causes leading to the difference in construction and application of accounting standards for impairment of assets for fixed assets for Vietnamese accountants. Propose policy recommendations to improve Vietnam’s accounting for impairment of assets regulations, in order to approach international practices and create favorable conditions for FDI enterprises. FINDINGS OF RESEARCH 1. ACCOUNTING FOR IMPAIRMENT OF ASSETS FOR FIXED ASSETS IN INTERNATIONAL ACCOUNTING STANDARDS AND IN SOME COUNTRIES IN THE WORLD. 1.1. Accounting overview of impairment of assets for fixed assets according to international accounting standard IAS 36: Impairment of Assets. Accounting for impairment of assets was built and applied in international accounting practices very early. In the system of international accounting standards, Accounting Standard IAS 36: Impairment of Assets was developed and published in 1998 to orient the content accounting work in these countries. Accounting for impairment of assets according to international accounting practices can be generalized through IAS 36 accounting standard with the following basic contents: Objective. The objective of IAS 36 is expressed in paragraph 01: The objective of this Standard is to prescribe the procedures that an entity applies to ensure that its assets are carried at no more than their recoverable amount. An asset is carried at more than its recoverable amount if its carrying amount exceeds the amount to be recovered through use or sale of the asset. If this is the case, the asset is described as impaired and the Standard requires the entity to recognise an impairment loss. The Standard also specifies when an entity should reverse an impairment and prescribes disclosures Scope. The scope of IAS 36 is shown in paragraph 02: - This Standard shall be applied in accounting for the impairment of all assets, other than: + inventories (see IAS 2 Inventories);
7. 988 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI + assets arising from construction contracts (see IAS 11 Construction Contracts); + deferred tax assets (see IAS 12 Income Taxes); + assets arising from employee benefits (see IAS 19 Employee Benefits); + financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement; + investment property that is measured at fair value (see IAS 40 Investment Property); + biological assets related to agricultural activity that are measured at fair value less estimated point-of-sale costs (see IAS 41 Agriculture); + deferred acquisition costs, and intangible assets, arising from an insurer’s contractual rights under insurance contracts within the scope of IFRS 4 Insurance Contracts; and + non-current assets (or disposal groups) classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Identifying an asset that may be impaired. This content of the standard is shown in paragraphs 09 and 10 as follows: - An entity shall assess at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the entity shall estimate the recoverable amount of the asset. - Irrespective of whether there is any indication of impairment, an entity shall also: + test an intangible asset with an indefinite useful life or an intangible asset not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test may be performed at any time during an annual period, provided it is performed at the same time every year. Different intangible assets may be tested for impairment at different times. However, if such an intangible asset was initially recognised during the current annual period, that intangible asset shall be tested for impairment before the end of the current annual period. + Test goodwill acquired in a business combination for impairment annually in accordance with paragraphs 80–99. Signs of impairment of assets and how to determine recoverable value. According to research by Hennie Van Greuning Marius Koen (2000), signs to identify impairment of assets and how to determine the recoverable value of lost assets are summarized as follows: The standard prescribes external and internal signs of a business to help identify when there are signs of a decrease in asset value. External signs such as: a decrease in the market price of the asset; changes in the technological, market, economic and legal environment have a negative impact on the unit; the carrying amount of the net asset is higher than the market capitalization Internal signs such as deterioration and obsolescence of the asset; production activities, production and business efficiency of assets are decreasing When having these signs, the unit must conduct an assessment of impairment of assets of asset value.
8. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 989 The Standard also specifies methods for determining the salvage value of assets. Include: - The fair value method minus the cost of selling the asset (referred to as fair value). - Use value method to determine the use value of assets. Value in use is understood as the present value of future cash flows estimated from the use of the asset or cash-generating unit. If the fair or use value is higher than the carrying amount, the carrying amount need not be calculated and the asset is not impaired. If fair value cannot be determined, the entity determines the asset’s use value. For assets pending disposal, the recoverable value is the fair value less the costs of selling the asset. Cash flow projections should be based on reasonable assumptions, most recent funding sources, and do not include cash flows arising from business restructuring or asset performance improvements. The forecast period is usually not more than 5 years; cash flow projections outside the forecast period are extrapolated based on a steady or declining growth rate over the following years. In determining value in use, the pre-tax discount rate reflects current market assessments of the value of money over time and the asset’s own risk. The discount rate must not reflect adjusted future cash flow risk. The recoverable value needs to be estimated for an individual asset. If it cannot be estimated, the enterprise determines the recoverable amount for the cash-generating unit of the asset. Cash flow generators are the smallest identifiable group of assets that generate cash flows from continued use of the cash flow generators largely independent of the cash flows from other assets or groups of assets. other products Principles of accounting and recognition of property losses. According to research by Hennie Van Greuning Marius Koen (2000), the principles of accounting and recognition of impairment of assets are generalized as follows: The principles for recognizing and calculating impairment losses for a cash flow generating unit are the same as those that apply to a single asset. When testing a cash flow generator for a decrease in value, the value of the firm’s advantage in assets relative to the cash flow generator will still have to be considered. If there is an indication that the value of an advantage or an asset may be impaired, the recoverable amount is determined for the cash flow generator of the asset class. IAS 36 specifies how to determine the carrying amount of a cash-flow generating entity and to allocate impairment losses among the assets of an entity. A impairment recognized in previous years should be reversed when and only if there is a change in the estimates for determining the recoverable amount from the last time the impairment was recognized. record. This amount is reversed only to the extent that it does not increase the carrying amount of an asset beyond the carrying amount that would have been determined for that asset if no impairment was recognized in previous years. . A reverse entry for a impairment should be recognized as income for assets carried forward at cost and recorded as a revaluation gain for assets carried forward at assessed value re-price. An impairment to the amount of advantage is not reversed unless the impairment is caused by a specific external event of an extraordinary nature that is not expected to occur and the external event is not expected to occur next event reverses the effect of that event.
9. 990 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI Principles of presentation and disclosure of property value loss. According to research by Hennie Van Greuning Marius Koen (2000), the principles of presentation and disclosure of impairment of assets are generalized as follows: Depreciation costs are recognized in the income statement when the asset’s salvage value is lower than its carrying amount. On the first application of this International Standard, the method of continuation should be applied, i.e. no comparative information shall be reported back. The following information should be disclosed for each type of asset and for each segment that must be reported according to the main form of the enterprise (if ISA 14 is applied). The first is the amount recognized in the income statement for impairment losses and reverses for impairment losses. This is followed by the amount recognized directly to equity for impairment losses and reversed for impairment losses. The Standard also provides for specific disclosure where impairment costs are material and non-material. 1.2. Overview of accounting for impairment of assets for fixed assets in some countries around the world. 1.2.1. Overview of accounting for impairment of assets for fixed assets in US accounting. In the American accounting system, accounting for impairment of assets for fixed assets is guided by the following standards and regulations: - SFAS 121 “Long-term asset decline and liquidation of long-term assets” issued in 1995. - SFAS 144 “Long-term impairment of assets and liquidation accounting” issued in 2001. According to SFAS 144, impairment of assets on fixed assets are detailed in ASC 350: Goodwill & priceless assets picture and ASC 360: Property, Plants and Equipment. Accounting for impairment of assets for fixed assets can be generalized through the following basic contents: Identifying an asset that may be impaired: The enterprise will have to determine and recognize an impairment of assets against a fixed asset when: residual value, carrying value of the fixed asset is higher than its fair value or the receivable value, recovery value or total value of undiscounted cash flows expected to be collected from the use or liquidation of such assets. Recognising an impairment loss: the signs to identify loss to fixed assets given by the ASC are similar to IAS 36: Impairment of Assets. Measuring an impairment loss: If a fixed asset shows signs of loss, determining the value of the loss will be done through two steps: + Step One: Testing to determine loss: is the process of comparing the carrying amount of fixed assets and undiscounted cash flows expected to collect from the use and liquidation of that asset. + Step Two: Test to determine real loss value: compare recoverable value and carrying amount of fixed assets. Accounting impairment of fixed assets:
10. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 991 + If a fixed asset is determined to have lost its value, the enterprise must record the value of the loss into its expenses during the period and at the same time record a decrease in the value of the lost fixed asset. However, American accounting do not allow recording an increase in asset value when there are signs of recovery. (Joanne M. Flood, 2017). + American accounting also require to present information on impairment of assets for fixed assets on financial statements, notes to the financial statements of the business. 1.2.2. Overview of accounting for impairment of assets for fixed assets in French accounting. In the world, France is one of the countries with a very developed accounting science. France has made many contributions to the establishment of the International Accounting Standards System. Along with many other countries in the world, France tends to build and apply accounting through selective inheritance of the International Accounting Standards System to ensure compliance with socio-economic characteristics. Typically, accounting for impairment of assets for fixed assets, French accounting tends to build and apply relatively different from international accounting practices (International Accounting Standard IAS 36: Impairment of Assets). French accountants have flexibly applied IAS 36 accounting standards through the accounting form of provision for devaluation of fixed assets. In the French accounting regime, real estate is an asset of great value and has a long useful life. These assets are built and purchased by the enterprise as a tool for production and business activities; they are not subject to short-term exploitation. According to the form of expression, real estate is divided into: tangible and intangible. (Nguyen Minh Phuong and Nguyen Thi Dong, 2002). In the French accounting system, enterprises need to set up a provision for devaluation of a number of assets, including: provision for devaluation of intangible and tangible real estate. For the accounting method of the provisions against devaluation of intangible and tangible real estate, depending on each type of property, the enterprise can make a provision without depreciation. Meanwhile, other types of real estate, though being depreciated but showing signs of loss, will make provisions. Provision for impairment of assets will be made at the end of each accounting year and before the year-end financial statements are prepared. At this point, if the enterprise detects that the real estate shows signs of decrease, that sign is the carrying amount that is assessed to be higher than the actual value of the real estate, the enterprise must make a provision. . When making provisions, the enterprise must record the amount of the appropriation into business expenses in the period through the provisioning account (Account 681). At the same time, the reciprocal recording enterprise is the detailed accounts tracking the provisions for each type of real estate, fixed assets such as: account 290, 291, 292, 293. (Nguyen Minh Phuong and Nguyen Thi Dong, 2002). In the following accounting year, if real estates for which provision has been set aside are liquidated, the enterprise must revert to the amount of the provisioned provision. At that time, the enterprise must record the increase in operating income in the period through the monitoring account of provision reversal (Account 781). At the same time, the enterprise proceeds to record reciprocal accounts of the provisions for liquidated real estate and fixed
11. 992 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI assets. In the end of the accounting year following the year, an enterprise should continue to assess the potential for impairment of assets of real estate. If the enterprise determines that the real estate shows signs of continuing to decrease in value and the required provisioning level is greater than the established level, the enterprise must make additional provisions for the following year. The additional provisioning will be continuously recognized in business expenses through account 681 and the reciprocal accounts are the accounts that track the level of provisioning for real estate. Conversely, if real estate and fixed assets show signs of recovery and the level of provision made is greater than the required amount in the following year, the enterprise will proceed to reverse the excess provision. The excess allowance will be recognized to the income of the business through account 781 and the reciprocal accounts are the accounts that track the level of provisioning for real estate. (Nguyen Minh Phuong and Nguyen Thi Dong, 2002). 2. COMPARING ACCOUNTING FOR IMPAIRMENT OF ASSETS FOR FIXED ASSETS IN VIETNAM WITH INTERNATIONAL ACCOUNTING STANDARDS, COUNTRIES IN THE WORLD AND CAUSES FOR DIFFERENCES IN VIETNAM. 2.1. Comparing accounting of impairment of assets for fixed assets in Vietnam with international and national accounting standards in the world The accounting standards system plays an important role in the orientation and regulation of accounting activities in each country. In Vietnam, the Minister of Finance has also issued Decision No. 38/2000 / QD / BTC dated 14 March 2000 on the promulgation and announcement of the application of Vietnamese Accounting Standards and Vietnamese Auditing Standards to businesses operating in production, business and auditing firms operating in Vietnam. In the following phases, decisions have been made on this issue. As follows: + Decision No. 149/2001 / QD-BTC dated December 31, 2001 of the Minister of Finance on promulgating and announcing four (04) Vietnamese accounting standards (phase 1). + Decision No. 165/2002 / QD-BTC dated December 31, 2002 of the Minister of Finance on promulgating and announcing six (06) Vietnamese accounting standards (phase 2). + Decision No. 234/2003 / QD-BTC dated December 30, 2003 of the Minister of Finance on promulgating and announcing six (06) Vietnamese accounting standards (phase 3). + Decision No. 12/2005 / QD-BTC dated February 15, 2005 of the Minister of Finance on promulgating and announcing six (06) Vietnamese accounting standards (phase 4). + Decision No. 100/2005 / QD-BTC dated December 28, 2005 of the Ministry of Finance promulgating and announcing four (04) Vietnamese accounting standards (phase 5). Up to now, the system of Vietnamese accounting standards includes 26 standards. However, accounting standards for impairment of assets have not been issued in Vietnam yet. In which, the standards that regulate the accounting of fixed assets include: + Accounting Standard No. 03: “Tangible fixed assets”; + Accounting Standard No. 04: “Intangible fixed assets”; + Accounting Standard No. 06: “Asset rental”, + Accounting Standard No. 05: “Real estate investment”
12. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 993 These standards do not address the identification of impairment of assetssigns, the valuation of property losses, and the accounting of impairment of assetsvalues for fixed assets. In summary, Vietnamese accountants do not have a specific orientation for the accounting work of impairment of assets for fixed assets according to international accounting standards IAS 36. Vietnamese accountants also do not have a way to apply standards international accounting IAS 36 in the direction consistent with the characteristics of the economy and society as in American accounting. In addition, Vietnamese accountants also do not have an alternative accounting method when considering the impairment of assets for fixed assets in case it is not possible to develop accounting standards for impairment of assets as in French accounting. Although Vietnamese accounting have regulations related to asset value reduction, these rules only refer to the revaluation of fixed assets. This is a very small piece of content related to asset value reduction, but it is also considered the first foundation, the premise for the construction and application of impairment of assets standards in Vietnam. Those regulations must be mentioned as: - According to: Circular 123 dated July 27, 2012 of the Ministry of Finance, the difference in revaluation of assets is the difference between the revaluation value and the residual value of assets recorded in the accounting books; - According to: Circular 45/2013 / TT-BTC “Guidance on the management, use and depreciation regime of fixed assets”; In Clause 4, Article 4 of the circular mentioned cases that may lead to the revaluation of fixed assets. - According to: Circular 200/2014 / TT-BTC “Guiding the corporate accounting regime” stated how to record the differences in asset revaluation on account 412 etc. 2.2. The causes leading to the difference in the construction and application of accounting standards for impairment of assets for fixed assets for Vietnamese accountants. The Vietnamese Accounting Standards System and the International Accounting Standards System still have many differences. One of these differences is the absence of accounting for impairment of assets standards in the Vietnamese accounting standards system. There are many reasons for the difference between Vietnamese accounting - international accounting in general and accounting for impairment of assets for fixed assets in particular. The basic causes must be mentioned as follows: Firstly, the differences in the theoretical foundation of accounting science and the specific characteristics of the socio-economy of Vietnam: Accounting for impairment of assets plays an important role in accounting activities, it helps a lot in determining the real value of fixed assets, it helps to increase the reliability of information on financial statements and help to properly evaluate the capacity of the business. However, the value of accounting for impairment of assets is only promoted when it is built and applied synchronously with a unified, appropriate and capable accounting theoretical foundation to support the operation of accounting for impairment of assets. Meanwhile, Vietnamese accounting have very few theoretical foundations to support the operation of accounting for impairment of assets. Besides, Vietnam’s socio-economy is a socialist-oriented
13. 994 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI market economy, and the young socio-economic environment has not yet developed strongly. This has a significant impact on the process of converging international accounting in general and building and applying accounting for impairment of assets in particular. Secondly, the differences in the application of the pricing model and accounting principles: The standards in the Vietnamese accounting standards system in general and the accounting standards oriented to fixed asset accounting in particular have a common point of recording under the pure cost model. This is a relatively big difference from international accounting standards in general and accounting for impairment of assets standards in particular because they are operated on fair value models and accounting estimates to value fixed assets, considering signs of impairment of assets. In addition, the application of accounting principles in Vietnamese accounting, particularly prudence, has influenced the process of determining the use value and recovery value of fixed assets. This cause is also likely to hinder the construction and application of accounting for impairment of assets for fixed assets in Vietnamese accounting. Thirdly, the differences and difficulties in the valuation and estimation of fixed assets: Fixed asset accounting is done under the net cost model, depending on prudent accounting principles, fixed assets will mainly be recognized and evaluated according to past information. At that time, the determination of recovery value, use value, valuation and estimated value of fixed assets will face many difficulties. On the other hand, this is what has a decisive role in the construction and application of accounting for impairment of assets. Fourthly, the difficulties in building and developing the fixed asset exchange market: In Vietnam, the economy is in the stage of development. The fixed asset market is not yet diversified. This creates many difficulties in the process of exchanging and valuing fixed assets. Not only that, it also indirectly causes obstacles to the valuation, determination of recovery value of fixed assets in particular and accounting for impairment of assets for fixed assets in general. 3. THE DIFFICULTY OF BUSINESSES IN GENERAL AND FDI ENTERPRISES IN SPECIFICALLY WHEN NO REGULATIONS ON ACCOUNTING OF PROPERTY LOSSES FOR FIXED ASSETS IN VIETNAM. Currently, Vietnamese accountants do not have regulations and guidelines on accounting for impairment of assets for fixed assets and there are no alternative solutions when it is not possible to develop regulatory accounting standards on this issue this topic. This has caused certain difficulties for fixed asset accounting activities at enterprises in general and FDI enterprises in particular. These difficulties include: Firstly, enterprises in general and FDI enterprises in particular will face difficulties in determining the real value of fixed assets, and information on fixed assets in these enterprises will also be difficult to ensure the accuracy. According to Vietnamese accounting, the value of fixed assets is determined by the principle of basis cost through: basis cost and accumulated depreciation. However, in the context of the market economy with the development of modern science and technology and the impact of many other factors, the determination of the value of fixed assets is simply
14. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 995 through the original cost and value accumulated depreciation cannot be accurately reflected. When accounting for impairment of assets for fixed assets is still not being developed and applied in Vietnam, fixed asset accounting in enterprises in general and FDI enterprises in particular often has a phenomenon: the carrying amount is greater than the actual value of the fixed asset. At that time, the business is not properly valuing the real value of fixed assets. If the enterprise does not properly assess the value of fixed assets, the enterprise will easily make wrong decisions in the management and use of fixed assets. In addition, if the enterprise has difficulty or cannot determine the real value of fixed assets, the information about fixed assets announced by the enterprise cannot be guaranteed to be accurate. Second, the financial statements of enterprises in general and FDI enterprises in particular have not accurately reflected the actual situation of enterprises. Fixed assets are an important indicator and often account for a large proportion of total assets of an enterprise. In Vietnam, the value of fixed assets is only considered according to the principle of basis cost and without the adjustment of accounting for impairment of assets the value of fixed assets tends to be overestimated than the actual value. This makes the information about fixed assets on the financial statements will not accurately reflect the true value of the assets. In fact, many businesses face the situation that the residual value of fixed assets is still there, but these assets cannot be used because the technology is outdated, the efficiency of use is not as expected. etc. In these cases, the asset values on the financial statements are inaccurate and the financial statements are not reflecting the actual situation of the business. Third, In FDI enterprises, investors and managers will have difficulty in making decisions. In Vietnam, accounting for impairment of assets for fixed assets has not been developed and applied. Therefore, if enterprises in general and FDI enterprises in particular have the phenomenon of asset value reduction, the information on fixed assets will be inaccurate. This greatly affects the accuracy of the information in the financial statements more seriously, does not reflect the actual situation, capacity and competitiveness of the enterprise. Because, the decrease in asset value will lead to the total assets affected, the financial and business situation of the business will also change. At that time, the decisions of investors and managers for the business will be inaccurate, not effective as expected. Recommendation from research results. Policy recommendations to complete regulations on accounting of property losses for fixed assets in vietnam to access international practices and create favorable condition for fdi enterprises. With the difficulties and specific characteristics in the socio-economy and in accounting and accounting activities, Vietnam will still have to make great efforts to converge international accounting. In the immediate period, the development and application of the full text of IAS 36 international accounting standards to accounting activities in Vietnam is not possible immediately. However, Vietnamese accounting can study the experiences of countries with developed accounting sciences such as the America and France in the development and application of accounting for impairment of assets for fixed assets to have a suitable direction
15. 996 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI for home country accounting. In the America, accounting for impairment of assets for fixed assets is based on the standard IAS 36: Impairment of Assets but it has been adjusted to conform to the economic management theory. In France, when the accounting standards for impairment of assets have not been established, French accounting have studied and applied flexibly the alternative accounting method. That is the use of real estate devaluation. With very creative methods of application but still ensuring the science and accuracy of French and American accounting, from my point of view, lessons and policy recommendations can be drawn in order to complete the regulations on accounting for impairment of assets for fixed assets of Vietnam, in order to approach international practices and create favorable conditions for FDI enterprises as follows: Vietnam develops and applies accounting for impairment of assets standards for fixed assets. The US and many countries around the world have chosen to build and apply accounting standards for fixed assets. At that time, accounting for impairment of assets for fixed assets is done on the basis of selectively absorbing international accounting standard IAS 36: Impairment of Assets. If Vietnamese accountants develop and apply fixed accounting for impairment of assets in this direction, the first thing to do is to remove existing difficulties in the economy - society and in accounting activities. At the same time, Vietnamese accounting also need to gradually develop preconditions in accordance with IAS 36. Specifically as follows: Firstly, we need to quickly solve difficulties and differences in the socio-economic and accounting activities in Vietnam. Include: The difference in the theoretical foundation of accounting science and the specific characteristics of the socio-economy of Vietnam. In order to build and apply IAS 36, Vietnamese accounting need to form a scientific and theoretical foundation in accordance with this standard. This helps to solve barriers in applying accounting for impairment of assets in accounting activities. The competent authorities need to review and update the issued standards, and add new standards if deemed necessary to ensure compliance with IAS 36. In addition, Vietnamese accounting needs to develop a specific roadmap to apply accounting for impairment of assets standards to ensure compliance with the characteristics of the socialist-oriented market economy in the stage of development of our country. The difference in applying the pricing model and accounting principles. Currently, Vietnamese accounting are operating under the pure cost model. Meanwhile, IAS 36 determines the value of lost fixed assets mainly based on the fair value model. Besides, some accounting principles of Vietnam (prudence principle) make it difficult to estimate and predict the value of fixed assets. Therefore, Vietnamese accounting need to consider the flexible application of valuation models and accounting principles to create a favorable basis for the development and application of IAS international accounting standards. 36: Impairment of Assets in Vietnam. The differences and difficulties in the valuation and estimation of fixed assets. In Vietnamese accounting, accounting information in general and fixed assets in particular only focus on past information content. This makes valuing and estimating assets
16. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 997 to consider the possibility of impairment of fixed assets will face certain difficulties. Therefore, Vietnamese accounting need to consider solutions to improve the accuracy of information predicting and estimating the value of fixed assets in the future. In addition, we need to consider adding a legal corridor to regulate and increase the accuracy and reliability of the assessment and disclosure of information about fixed assets in the business. Difficulties in building and developing the fixed asset exchange market. Currently, Vietnam’s economy is still in the development stage, the socio-economic environment has not really developed strongly and stably. The economy lacks many factors, one of which is the absence of exchange markets for assets in general and for fixed assets in particular. Even many fixed assets do not yet have a market to exchange and determine their value. This is a huge obstacle in the application of IAS 36 international accounting standards in Vietnam. In the next stage, we need to research, construct and develop diversified fixed asset exchange markets with various types of assets to meet the requirements of building and applying IAS 36: Impairment of Assets. In cases the market for the operation of fixed assets cannot be detailed for each type of asset, there should be plans for the conversion or valuation of equivalent fixed assets as a basis for determining the actual value of the fixed asset. Secondly, Vietnamese accounting need to step by step build prerequisites in accordance with IAS 36: Impairment of Assets. In order to be able to establish and operate accounting for impairment of assets standards for fixed assets, Vietnamese accounting need to prepare certain necessary prerequisites. The prerequisites must be built and prepared, first of all, must be mentioned as: Factors forming accounting for impairment of assets for fixed assets. Vietnamese accounting need to develop a way of determining the money-generators of fixed assets, the signs to identify property losses, methods of determining the loss value and the recovery value of fixed assets etc. Fixed accounting for impairment of assets operation operating factors. To operate accounting for impairment of assets standards, Vietnamese accounting need to develop: specific guidelines for accounting for impairment of assets for fixed assets, the system of documents, accounts, books and reports to track impairment of assets to fixed assets etc. Vietnam chooses an alternative accounting method in the condition that it is not possible to establish accounting standards for impairment of assets. In some countries, with many reasons that may lead to the development and application of accounting standards for impairment of assets is not possible, the choice of an alternative accounting method is essential. Specifically, French accountants have chosen the accounting method of making provision for devaluation of fixed assets. Basically, this accounting method of France is still built on the basis of international accounting practices (IAS 36: Impairment of Assets). Because, the indication and the way of determining the potential impairment of a fixed asset is done through a comparison of the market price and carrying amount.
17. 998 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI Besides, Vietnamese accounting and French accounting have many similarities in accounting in general and fixed asset accounting in particular. Specifically, French accounting are still using the original price model and prudent accounting principles in accounting activities. Therefore, the French real estate devaluation reserve accounting is a fairly reasonable method to study and apply when Vietnamese accounting cannot build and apply impairment of assets standards to fixed assets. If Vietnamese accounting want to study and apply this accounting method to fixed impairment of assets, we still need to solve the difficulties and differences in accounting activities and in the socio-economy. At the same time, Vietnamese accounting need to build up the premises to serve the provision for loss of fixed assets. As follows: Firstly, we need to quickly resolve the difficulties and differences in the socio-economy and accounting activities in Vietnam. These issues include: The difference in the theoretical foundation of accounting science and the specific characteristics of the socio-economy of Vietnam. The difference in applying the pricing model and accounting principles. The differences and difficulties in the valuation and estimation of fixed assets. Difficulties in building and developing the fixed asset exchange market. All these contents, I have detailed the solution in the above section, so I would not to present it again. Secondly, Vietnamese accounting need to build premises to serve the provision for impairment of assets. Include: Factors forming fixed impairment of assets reserve accounting. Vietnamese accounting need to study and learn French accounting when operating the original price model and prudent accounting principles. Specifically: French accounting still allows the operation of real market prices when determining the value of an asset, and allows the flexibility of estimates and estimates in valuation accounting. Vietnamese accounting need to research and apply these issues appropriately because this is an important factor to help identify signs of impairment of assets and determine recovery values, loss values ​​of fixed assets. Accounting operation factors for loss of fixed assets. A provision for impairment of assets has been established in Vietnam. However, Vietnamese accounting have not considered fixed impairment of assets provisioning. Vietnamese accounting only focuses on objects such as: decrease in trading securities, investment loss, inventory price decrease etc. However, this is also a prerequisite step in the research and application of the provision for devaluation for fixed assets. In order to do this, Vietnamese accounting need to develop: specific guidelines for accounting for fixed impairment of assets, systems of documents, accounts, books and tracking reports to provison impairment of assets etc. However, according to my point of view, Vietnamese accounting can study and apply the same fixed impairment of assets provisioning accounting as in French accounting because Vietnamese accounting and French accounting have many similarities in accounting in general and fixed asset accounting in particular.
18. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 999 CONCLUSION International economic integration and the increase of FDI enterprises are issues that economic managers are very concerned about. This accelerates Vietnam’s international accounting convergence, which needs to be done quickly. Therefore, accounting for impairment of assets in general and fixed assets in particular will certainly have to be developed and applied in Vietnam. The above is my research on the accounting of impairment of assetsfor fixed assets according to international accounting standards and in some countries with developed accounting science such as France and the US. I also generalized the current situation of accounting for impairment of assets for fixed assets in Vietnam and analyzed the causes leading to the difference in the construction and application of accounting for impairment of assets standards for the fixed assets for Vietnamese accountants. Through this research, I hope to be able to find out how to build and apply the accounting activities of impairment of assets for fixed assets that are most suitable for Vietnamese accountants. In the next period, I will continue to study this issue more deeply and multi-dimensionally to have the most effective solutions for Vietnamese accounting. REFERENCES 1. Chu Thuy Anh (2013), IAS 36 standards and conditions for applying IAS 36 in Vietnam, Master’s thesis in accounting, Ho Chi Minh City University of Technology. 2. Dang Thi Hong Ha (2017), “Improving the accounting of provisions and impairment of assets in construction enterprises in Vietnam”, Economic doctoral thesis, Academy of Finance. 3. Dang Thi Hue (2019), “Accounting of fixed assets in coal mining enterprises of Vietnam coal-mineral industry group”, Economic doctoral thesis, University of Commerce. 4. Hennie Van Greuning Marius Koen (2000), International Accounting Standards, National Political Publishing House, Hanoi. 5. International Accounting Standard Board, International Accounting Standard No.36 (IAS36) - Impairment of Assets, downloaded from 6. Joanne M. Flood (2017), Wiley GAAP 2017: Interpretation and Application of Generally Accepted Accounting Principles, Inc. Published 2017 by John Wiley & Sons, Ltd. 7. Le Hoang Phuc (2012), “Current situation and orientation to use fair value in the Vietnamese accounting system”, Journal of Auditing No. 1/2012. 8. Ministry of Finance (2013), Circular 45/2013 / TT-BTC, Guiding regime of management, use and depreciation of fixed assets. 9. Ministry of Finance (2014), Circular 200/2014 / TT-BTC, Guidance on enterprise accounting regime. 10. Ministry of Finance (2016), Circular 133/2016 / TT-BTC, Guidance on the accounting regime for SMEs. 11. Ministry of Finance, 26 accounting standards, issued from 2001 to 2005; 12. Ngo Thi Thu Hong and Bui Thi Hang (2016), “Principle of fair value according to the Accounting Law: Theory and application orientation in Vietnam”, Financial Review, November 2016. 13. Nguyen Minh Phuong and Nguyen Thi Dong (2002), International Accounting, Statistical Publishing House, Hanoi.
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